The idea of blockchain started out packaged as a use case that attempted to replace government-regulated fiat currency with cryptocurrency. However, it has expanded dramatically since then, with use cases being identified across a myriad of segments including finance, energy, supply chain and defense. In all likelihood, cryptocurrency could be called a precursor to the potential of blockchain, a use case that made people sit up and take notice about an underlying technology so promising that it could revolutionize the way we look at privacy and digital transparency.
Blockchain, by definition, is an immutable distributed ledger. Put in layman terms, blockchain can store and relay information in a secure manner, with its content being distributed and controlled by all the stakeholders in a network. No single stakeholder can claim absolute authority over the network, nor can any single party edit information stored in the system without the explicit consent of every other stakeholder in the system. This ensures visibility and transparency – two vital parameters that have remained elusive across many segments for decades.
Though blockchain brings in a reasonable amount of sophistication to different verticals, it makes sense only in scenarios where it can be integrated seamlessly with minimal disruption to everyday operations. A Gartner report analyzed the hiccups that different industries would face while implementing blockchain, and pointed out that 75 percent of public blockchain programs would suffer from “privacy poisoning” – an issue complicated by privacy laws and government regulations.
However, even in the midst of such issues, there are only good things to say about blockchain adoption in the transportation and logistics sector. In many ways, blockchain would be a perfect solution to many issues that plague the industry – opacity across network nodes, an extremely fragmented marketplace, multiple stakeholders and mediocre visibility.
Take the case of trucking, for instance. Trucking is a massive industry in the U.S., accounting for over $720 billion in annual revenue, representing 81.5 percent of the country’s total freight bill. The sector suffers from severe fragmentation, with 90 percent of the trucking fleets owning six or fewer trucks. These extremes create a situation where shippers lack transparency into available trucking capacity, while truckers log thousands of deadhead miles, missing out on hauling opportunities due to network opacity. Blockchain, if appropriately implemented, would help to bridge this disconnect.
To bring this to fruition, it is essential to create blockchain standards for the industry, by working alongside all the stakeholders who take part in the marketplace. A non-profit association, the Blockchain in Transport Alliance (BiTA), is working to create open blockchain standards for the industry at large, by pooling in hundreds of stakeholders across the world, and constructing a framework over which blockchain applications can be developed. The key here is “open standards” – which essentially means that any company willing to build a blockchain application can do so without worrying about proprietary issues or infringement laws.
Despite the efforts of BiTA and others, blockchain implementation does come with its share of complexities. For starters, blockchain can only be effective if all the stakeholders in the ecosystem trust the framework and share information without being suspect of data safety. Much needs to be done to convince businesses to trust blockchain and provide the necessary information; an exercise that could take a while. Companies must also move towards data standardization, wherein all the data that is captured would have the same yardstick of measurement, making it easier for data to be shared and attributed with an intrinsic value.
SAP conducted a survey last year, asking its clients about their willingness to work on blockchain-related pilot programs. An overwhelming number of responses were positive, with 84 percent of the queried companies already involved in building use cases around blockchain. Though a large portion of these pilot runs has still not translated into commercial applications, the engagement with blockchain can be taken as a step in the right direction.
Supply chains have much to gain from blockchain applications, especially the ones where consumer health is at stake – like those involving the pharmaceutical or food supply chains. Blockchain paired with the industrial Internet of Things (IIoTs) could help prevent bad actors from injecting counterfeit or expired products in the mix.
Technological advancement has shrunk some IIoT devices to become smaller than a grain of salt. These devices can be attached to products as they move along the supply chain, helping to identify their origin and the stakeholders it passes through. Storing this information on a blockchain network would help not just with visibility, but also with transparency – reducing the friction between shippers and consumers.
The future of blockchain in the freight industry depends heavily on industrial cluster adoption and the reception it gets from each facet of the supply chain. On paper, blockchain does appear to be a technology that is tailor-made for the freight market, but it remains to be seen how effective its translation will be in real-world applications.